Proving and Tracking Damages of your Claim

Transcription

1 Proving and Tracking Damages of your Claim J. Mark Dungan October 6, Schedules: Back to Basics I. CPM Scheduling Basics II. The Baseline Schedule III. The Schedule Update IV. Delay Analysis V. Proving and Tracking Damages Presented by Gentry Locke attorneys and Delta Consulting Group 1

2 Proving and Tracking Damages A. Basic Approach B. Delay C. Disruption ( Loss of Productivity - LOP) D. Cumulative Impact 3 Proving Damages Basic Approach for Delay and Disruption (LOP) Entitlement Contract Analysis Quantification Contract Methodology 4 Presented by Gentry Locke attorneys and Delta Consulting Group 2

3 Proving Damages Delay Entitlement Contract Allowable: No damage for delay Notice provisions Methodology specified Analysis Prospective Retrospective 5 Proving Damages Delay Quantification Contract Allowable: FOOH, HOOH Stipulated Methodology Daily Rate Itemized 6 Presented by Gentry Locke attorneys and Delta Consulting Group 3

4 Proving Damages Contractor must demonstrate that it has or will incur additional costs because of the delay Potential damages might include: Direct Costs ( Escalation / Acceleration) Increased labor costs Increased material costs Increased equipment costs Indirect Costs (Time related/escalation/thickening) Additional field overhead Additional home office overhead 7 1. Compensability 2. Excusability of a Delay 3. How is Compensable Delay Priced? 4. Costs and Rates 5. What Should a Schedule Expert Provide to the Damages Expert? Presented by Gentry Locke attorneys and Delta Consulting Group 4

5 Excusability: There are Two Ways to Categorize Delay Compensable Delay 1 - Excusable 2 - Non Excusable Not Compensable Not Compensable 9 Types of Delay Contractor Non Excusable Excusable Compensable Not Compensable Relief from Liquidated No Yes Yes Damages Additional Time No Yes Yes Additional Cost No No Yes Owner Liquidated Damages Yes No No Extend Project Duration No Yes Yes 10 Presented by Gentry Locke attorneys and Delta Consulting Group 5

6 Excusable vs. Non Excusable Delay Excusability exists where there is contractual or equitable justification in a claimants request for a contract time extension for relief from potential claims for liquidated/stipulated or actual delay damages. The showing of excusability does not necessarily mean that the claimant is also entitled to compensation for the delay. Conversely, delay is non-excusable when such justification does not exist. Source: AACE International Recommended Practice No. 29R-03, page Compensable Delay Compensability or compensable delay exists where the claimant is entitled to recover not only a time extension but compensation for expenses associated with the extension of completion date or the prolongation of the duration of work. Excusability is a prerequisite to compensability. Therefore, where compensability can be established, excusability is assumed. Source: AACE International Recommended Practice No. 29R-03, page Presented by Gentry Locke attorneys and Delta Consulting Group 6

7 Excusable and Compensable Delay (ECD) Each incremental delay along the as-built critical path should be independently quantified and the cause of the delay identified. The net Excusable & Compensable Delay (ECD) is the sum of the individual delays that: 1) were the responsibility of the owner, and 2) delayed the completion date of the project, and 3) were not concurrent with delays which were the responsibility of the contractor or force majeure events. Source: AACE International Recommended Practice No. 29R-03, page What Costs are Delay Related? What are the contract terms? The contract terms and conditions are the ultimate authority and may specifically establish compensable costs General Rule Time Related Costs Additional cost that are going to be incurred should the project start late or the duration be extended 14 Presented by Gentry Locke attorneys and Delta Consulting Group 7

8 Typical Cost Categories Sticks & Bricks LEMSO Labor Equipment Material Subcontract Other On-Site expenses FOOH Management Supervision Safety Field Office Off-Site expenses HOOH Executives Marketing Accounting Home office 15 Cost Categories Inconsistent Terminology Direct Costs Sticks & Bricks LEMSO Labor Equipment Material Subcontract Other Direct Costs Indirect Costs Field Indirect Costs General Conditions On-site expenses FOOH Management Supervision Safety Field Office Indirect Costs Home Office costs General & Administrative Off-Site expenses HOOH Executives Marketing Accounting Home office 16 Presented by Gentry Locke attorneys and Delta Consulting Group 8

9 What Costs are Delay Related? LEMSO L = Labor Typically not a direct delay damage but subject to escalation E = Equipment Potentially subject to daily delay and escalation M = Material Generally not a direct delay damage but subject to escalation S = Subcontractors Subs will likely have pass-thru delay damages in similar categories to the Prime GC O = Other Misc. costs 17 What Costs are Delay Related? FOOH Trailer A Field Office Costs Supports A Project Utilities Office Staff & Field Supervision Supplies & Equipment Typical Costs Supervision (Project Manager and Superintendents not associated with a labor crew) Project Engineer Administrative Staff Field Office Trailer Field Office Equipment Field Office Utilities Field Office Supplies Home Office Costs Supports All Operations FOOH costs are typically Time-related and compensable Non-Time related FOOH costs would include one-time costs such as Mobilization/Demobilization, certain Insurance/Bond costs Presented by Gentry Locke attorneys and Delta Consulting Group 9

10 How to Quantify Delay Damages FOOH Daily Rate Daily rate should capture the time-related costs incurred as a result of the compensable delay What time period? Should correspond with the time of compensable delay For example, If delay occurred at the beginning of the project, the daily rate should be restricted to this period, and not include costs from the rest of the project. If delay occurred throughout the project, using time-related costs for the entire project may be appropriate. 19 How to Quantify Delay Damages FOOH Daily Rate Daily rate should not be calculated daily, due to potential variations due to timing. Generally capture costs for each month and divide by the number of days to arrive at a daily rate. Markups, bond, insurance are usually not included, but refer to contract terms. In general, capture the total time-related costs during the delay period, and divide it by the number of days in the period, to calculate a daily rate. 20 Presented by Gentry Locke attorneys and Delta Consulting Group 10

11 Example of Daily Rate Calculation (cont d) $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 21 Example of Daily Rate Calculation (cont d) a b=5.774% x a c d=(a+b)/c e Bond, Liab. Ins. Daily Crane Time Related Gen Excise Tax Days per Time Related Labor, Mat. Month Costs 5.774% Month Daily Rate & Equip Oct-12 $652 $38 31 $22 Nov-12 6, Dec-12 18,994 1, Jan-13 48,335 2, ,649 Feb-13 38,873 2, ,468 Mar-13 79,903 4, ,726 $1,395 Apr ,362 7, ,420 1,395 May ,984 10, ,971 1,395 Jun ,255 10, ,109 1,395 Jul ,333 10, ,255 1,395 Aug ,120 12, ,511 1,395 Sep ,082 9, ,103 1,395 Oct ,627 11, ,709 1,395 Nov ,675 9, ,630 1,395 Dec ,548 8, ,069 1,395 Jan ,531 11, ,569 1,395 Feb ,968 8, ,439 1,395 Mar ,003 9, ,494 1,395 Apr ,037 11, ,123 1,395 May ,719 12, ,258 1,395 Jun ,061 12, ,406 Jul ,714 14, ,862 Aug ,135 13, ,921 Sep ,750 12, ,818 Oct ,124 15, ,149 Nov ,948 13, ,425 Dec ,839 6, ,953 Jan-15 76,936 4, ,625 Feb-15 89,907 5, ,396 Mar-15 98,998 5, , Presented by Gentry Locke attorneys and Delta Consulting Group 11

12 Example of Daily Rate Calculation (cont d) 23 What Costs are Delay Related? HOOH A Field Office Costs Supports A Project Home Office Costs Supports All Operations Project 1 % % Project 2 Project 3 % Home Office Categories Executives Business Development and Staff Marketing Legal and Accounting Staff Corporate Office Costs and Utilities Other Characteristics Generally Time Related Costs are not attributable to any single project but are absorbed by every project Presented by Gentry Locke attorneys and Delta Consulting Group 12

13 What Costs are Delay Related? HOOH Common Methods for Calculating Eichleay Formula Percentage Mark Up on Costs Specific Allocation Carteret or Allegheny Methods Manshul Method 25 Eichleay Formula Contract Billings / Total Billings for Actual Contract Period Total Contractor s Home Office Overhead Costs for Actual Contract Period Home Office Overhead Allocated to Project Home Office Overhead Allocated to Project Actual Contract Period Daily Home Office Overhead for Project Daily Home Office Overhead for Project Days of Delay Home Office Overhead Damages for Project 26 Presented by Gentry Locke attorneys and Delta Consulting Group 13

14 What Costs are Delay Related? HOOH Major Categories of Costs Excluded from the Pool Bad Debts Contributions or Donations Entertainment Costs Interest on Borrowing Losses on Contracts Certain Public Relations and Advertising Costs 27 Disruption Damages Generally referred to as: Loss of Productivity or Loss of Efficiency Typically Craft Related damages Potential for Equipment and Material Damages Presented by Gentry Locke attorneys and Delta Consulting Group 14

15 Productivity Loss 29 Proving Damages Disruption Entitlement Contract Allowable Notice provisions Analysis Research Presentation of findings 30 Presented by Gentry Locke attorneys and Delta Consulting Group 15

16 Proving Damages Disruption Quantification Contract Methodology Measured-Mile Industry studies 31 Entitlement Examples 32 Presented by Gentry Locke attorneys and Delta Consulting Group 16

17 Entitlement Examples 33 Entitlement Examples Quantity of Drawing Changes Issued per Week 34 Presented by Gentry Locke attorneys and Delta Consulting Group 17

18 Entitlement Examples 35 Entitlement Examples Example of Entitlement and Quantification combined on one page 36 Presented by Gentry Locke attorneys and Delta Consulting Group 18

19 Entitlement Examples 37 Entitlement Examples 38 Presented by Gentry Locke attorneys and Delta Consulting Group 19

20 Entitlement Examples 39 Entitlement Examples 40 Presented by Gentry Locke attorneys and Delta Consulting Group 20

21 Productivity Data Output Input OR Input Output Quantity Hours Traditional Productivity Earnings Hours Earned Value Productivity 41 Methodologies 42 Presented by Gentry Locke attorneys and Delta Consulting Group 21

22 Productivity Loss Measured Mile The Measured Mile methodology compares the actual productivity achieved on similar activities to determine a loss of productivity. The Baseline productivity represents the best the contractor could achieve when operating under conditions it controlled or largely controlled. The Impacted productivity is that achieved when operating under conditions largely out of its control 43 Productivity Loss Measured Mile UNITS 125 sqft /Hour 100 sqft /Hour TIME Estimated Productivity Baseline Productivity 50 sqft /Hour Productivity Loss Unclaimed Productivity Loss Claimed Impacted Productivity 44 Presented by Gentry Locke attorneys and Delta Consulting Group 22

23 Productivity Loss Measured Mile Baseline / Measured Mile Work Quantity Hours Baseline Productivity Lost Hours 0 Impacted Work Quantity Should Have Been hours Baseline Productivity Actual hours Should Have Been hours Lost Hours 45 Efficiency Factor Measured Mile Efficiency Factor 100% 80% 40% Estimated Productivity Baseline Productivity Productivity Loss Unclaimed Productivity Loss Claimed Impacted Productivity 46 Presented by Gentry Locke attorneys and Delta Consulting Group 23

24 Efficiency Factor Measured Mile 47 THANK YOU Presented by Gentry Locke attorneys and Delta Consulting Group 24